Commercial sector to become more valuable after COVID-19 – CBRE

by Ephraim Vecina22 Apr 2020

Acquisition of expansive properties has fallen to the wayside, but commercial real estate is poised to become an even more desirable choice for investment after the coronavirus pandemic, according to CBRE.

This will be particularly apparent in Toronto, CBRE’s recently released “Q1 2020 Canadian Cap Rates & Investment Insights” document reported.

“With internal operational issues consuming 100% of many firms’ time, new investment decisions have become secondary for the time being,” CBRE said. “Term, covenant and existing financing have become increasingly important across asset classes. These factors will continue to enhance or eliminate liquidity for firms moving forward.

“With risk-free interest rates approaching zero, the real estate sector is poised to be an even more attractive investment option once the markets begin to normalize,” CBRE said.

The Canadian office market is ideally placed to exhibit some of the better performances this year.

“After a strong 2019, the office sector had built considerable momentum going into 2020 and was on track to see robust investment activity prior to the market shutdown brought on by COVID-19,” CBRE said. “Given the strength of office fundamentals entering the slowdown, it’s expected that the asset class will be on solid footing when the economy begins to re-open later in 2020.”

Industrial real estate will also prove resilient against the worst economic effects of the current crisis.

“It’s expected that the implementation of social distancing and quarantine measures should increase demand for ecommerce offerings over the remainder of 2020,” CBRE said. “The critical role of industrial assets in omnichannel and global supply chains is only forecast to increase and will ensure the sector remains well supported by strong fundamentals, especially on a relative basis.”

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